How is profit defined in a business?

Profit in a business context is defined as the difference between revenue and expenses. This means that profit represents the amount of money that remains after all costs associated with running the business have been deducted from the total revenue earned.

When a business generates revenue from sales or services, it incurs various expenses, such as costs of goods sold, operational costs, payroll, and other overheads. By calculating profit in this way, businesses can assess their financial performance and sustainability. A positive profit indicates that a business is operating successfully, while a negative profit would suggest that the expenses exceed the revenue, leading to losses.

Understanding profit in this manner is crucial for business management, as it helps in making informed decisions related to pricing, cost control, and future investments.